Calculating an effective ROI number for each of your roadmap items

Calculating an effective ROI number for each of your roadmap items

Fractional GTM Head

Product teams have an evergreen problem to decide which items *actually* make it into a roadmap, which is a classic prioritization exercise. Almost all prioritization frameworks are a version of calculating cost vs benefit. The challenges as an organization grows are:

  1. Aligning what the cost and benefit is as a team, so everyone is seeing the same thing.

  2. Getting specific so that the ROI is not arguable once aligned.

At ProductHub, we solve both (1) and (2) through approximating "ROI" (return on investment) for each roadmap item. We do that through what we call the back of the napkin (BON) calculation, resulting in a $ or € number that is less disputable.

Irrespective of what kind of a roadmap item you have, be it a bet that's innovative/visionary or a critical bug fix or even an enhancement your best customers are asking for,

BON Calculation of Cost

The primary costs for any initiative are:

  1. How much your spending on your development team to execute the roadmap item, which is the majority of the cost. This means, having an idea of how much an engineer, a designer, analytics (or any role) would cost in $/€ for each sprint. To simplify we come up with a median cost of a team member to ship the project and use the number of the weeks to usable / adoptable feature, as the cost.

  2. There may be other critical costs including, but not limited to partnership fees, licensing fees, infrastructure costs, that can be added. We are keeping this example simple for now.


BON Calculation of Benefit

There are different ways of quantifying benefits; to list some of them:

  1. What are your customers willing to pay you for shipping this feature and how many customers would that be? Can we get an idea of this number from your sales or customer success reps?

  2. If you don't ship the feature, is there way to quantify how many customers will churn or potential deals you may lose?

  3. Is there a way you can calculate future velocity if you are working on a technical debt initiative, that can give productivity uplifts for your team?

Having these questions front and center and putting a number to it, via both an art and science, helps bring the teams together. There is a confidence level to each calculation that we help you to arrive at a final number; see the example below.



Once you are able to calculate BON ROIs for each roadmap item, it becomes easy to know which one gets slotted into your quarterly roadmap and which isn't, and everyone on your organization, leaders and individual contributors included get to see clearly what the bets on each initiative look like.

We’ve been fortunate to work with some of the early customers, including BettyBlocks, Fourthline, Viktor.ai in building their roadmaps based on ROI which has helped teams save hours in the planning process and prepare them for the impact they are looking to deliver.

If you’d like to dive into how ROI looks for your product strategy, book a free call here.

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For CEOs, founders and leaders in SaaS, crafting a product roadmap that aligns with both strategic goals and operational capacity is pivotal these days. While many roadmaps are built from the bottom-up, relying heavily on customer feedback and the louder internal voices, the key to sustained growth and profitability lies in a top-down strategic approach, balanced with an understanding of the company's capacity. 

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PUBLISHED ON

Feb 5, 2024

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